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France Holding Companies Guide

French holding company structures and taxation. The guide covers: the régime mère-fille (parent-subsidiary regime) — a French parent company that holds at least 5% of the share capital of a subsidiary for at least 2 years can benefit from the exemption of 95% of the dividends received from the subsidiary (the 5% non-deductible portion is the "quote-part de frais et charges"); the exemption applies to dividends from both French and foreign subsidiaries (subject to the EU Parent-Subsidiary Directive or a tax treaty); the parent company must be subject to the corporate tax (IS) and must hold the shares for at least 2 years (or commit to holding them for 2 years); the tax consolidation (intégration fiscale) — a French group of companies can elect to file a consolidated tax return (the "régime d'intégration fiscale") if: (a) the parent holds at least 95% of the shares of each subsidiary (directly or indirectly), (b) all companies in the group are subject to French corporate tax (IS), (c) the parent files the consolidated return; the advantages of the intégration fiscale: (a) the profits and losses of the group companies are offset against each other (the "compensation des bénéfices et des pertes"), (b) the group pays tax on the net profit of the consolidated group, (c) the dividends paid within the group are eliminated (the "élimination des dividendes intra-groupe"), (d) the group can offset the capital gains and losses on intra-group asset transfers (the "sursis d'imposition des plus-values intra-groupe"); the holding company structures — the two main types of holding companies in France: (a) the "holding pure" — a company that holds shares in other companies only (no operational activity), (b) the "holding animatrice" — a holding company that actively manages its subsidiaries and provides services (management, strategy, finance) — this status is important for the application of certain tax benefits (the "régime des plus-values à long terme" and the "exonération de l'IFI sur les parts de sociétés"); the taxation of capital gains on the sale of shares by a holding company — the holding company benefits from the "régime des plus-values à long terme": the capital gain on the sale of qualifying shares (held for at least 2 years and representing at least 5% of the subsidiary) is exempt from corporate tax (the "exonération des plus-values de cession de titres de participation"), with 12% of the gain treated as non-deductible expenses (the "quote-part de frais et charges" of 12%); the financing of subsidiaries — the holding company can provide financing to its subsidiaries in the form of: (a) equity (the "augmentation de capital" — the subscription of shares), (b) loans (the "prêts" — the holding company can lend money to the subsidiary at market interest rates), (c) cash pooling (the "centralisation de trésorerie" — the group can centralise the cash flows, with the interest paid between group companies being subject to the arm's length principle); the interest on the loans from the holding company to the subsidiary is deductible for the subsidiary (subject to the thin capitalisation rules — the "règles de sous-capitalisation": the interest is deductible only up to (a) the amount of the equity held by the lending company, (b) the "safe harbour" of €3 million, or (c) 30% of the EBITDA, whichever is higher).

The holding company is a common structuring tool in France for business groups. All amounts in Euros (EUR). For related reading, see our Corporate Tax Guide → and Company Forms Guide →.

Parent-Subsidiary Regime

• 95% exemption: Dividends received from a qualifying subsidiary are 95% exempt from corporate tax. The 5% non-deductible portion (quote-part de frais et charges) is treated as a permanent difference. The parent must hold at least 5% of the subsidiary's capital for at least 2 years. The regime applies regardless of the subsidiary's country (subject to the anti-abuse clause and the EU Parent-Subsidiary Directive).

Intégration Fiscale

• 95% ownership: The parent company must hold at least 95% (directly or indirectly) of each subsidiary in the consolidated group. All companies must be subject to French corporate tax. The group files a single consolidated tax return (the "intégration fiscale") and pays the tax on the net consolidated profit.
• Advantages: (a) the immediate offset of losses from one subsidiary against the profits of another, (b) the elimination of intra-group dividends, (c) the deferral of capital gains on intra-group transfers, (d) the option to allocate the group's tax burden among the members of the group (the "répartition de l'impôt" — the group can allocate the tax to each company based on a contractual agreement).

For the thin capitalisation rules and the interest deduction limitations, see our Corporate Tax Guide →. For the holding animatrice status and the IFI exemption, see our Wealth Tax (IFI) Guide →.